Introduction

Chapter 11 - SME Barriers to Electronic Commerce Adoption: Nothing Changes-Everything is New
Managing IT in Government, Business & Communities
by Gerry Gingrich (ed)
Idea Group Publishing 2003

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As a majority of the large businesses now have entered the "new information society," the small and medium-sized enterprises are expected to be next in turn. SMEs have undoubtedly an important role in most economies and are fundamental, especially in less developed countries and peripheral European regions. For example, in UK SMEs represent over 95% of all businesses registered for VAT, employ 65% of the work force, and produce 25% of gross domestic product (Ballantine, Levy, and Powell, 1998). SMEs play a key role in the economy by generating employment, engendering competition, and creating economic wealth (Hay and Kamshad, 1994). They are also fundamental in promoting new innovations (ibid.) and providing society with new products (Walczuch, van Braven, and Lundgren, 2000). At the same time SMEs are characterized by a high degree of failures (Ballantine et al., 1998). Within five years 80 % of all new small businesses have failed (ibid.). Because of their importance, small businesses need to be embraced in the new information society as the Internet in the long run might affect their productivity, market access, and competitiveness (Walczuch et al., 2000). To be able to survive and prosper SMEs need to keep up with their larger counter-partners' way of doing business.

In recent years one of the most apparent trends in business is e-commerce. Even if the growth in e-commerce still has not been able to fulfil the optimistic prognosis, it is certainly here to stay. E-commerce in SMEs has become an important subject both in policy formulation and in research. For example, OECD (1998) believes that the adoption and diffusion of e-commerce among SMEs could contribute to increasing substantially their competitive advantage. Often e-commerce or electronic business is seen almost as the latest "miracle cure" for SMEs. Various national and regional (e.g., EU) projects on "SME awareness" to facilitate SME involvement in e-commerce are becoming more and more common on national and regional political agendas. Research studies on this subject are increasing as well (e.g., Chen and Williams, 1998).

It is feared, however, that because of a number of barriers and inhibitors, SMEs are left out of the developments in the information society. The high capital investment involved in IT adoption and the need of skilled manpower make the barriers larger for SMEs than for larger businesses (Thong, 2001). According to OECD (1998), the most significant barriers of e-commerce for SMEs in the OECD countries are lack of awareness, uncertainty about the benefits of e-commerce, concerns about lack of human resources and skills, set-up costs and pricing issues, and concerns about security.

The development of the Internet has opened up e-commerce between businesses (B2B) as well as between businesses and consumers (B2C). The big difference from earlier communication methods is the wide availability and low cost of the technology. Start-up costs and transaction costs are far lower than before, and an increasing part of companies and consumers are using the Internet to conduct their business. Still the small and medium-sized companies are hesitating.

In this chapter we look into earlier empirical research on the barriers to e-commerce for SMEs. What we are interested in is whether these barriers are something new created by the new wave of Internet-based technologies. Our grounding argument is that these barriers have remained the same since SMEs got involved in IS/IT and are not particularly specific to the new Internet-based technologies. We look at adoption and diffusion barriers of different information technologies in SMEs, with the focus on information and communications as well as e-commerce technologies, including different inter-organizational systems (IOS), EDI, and Internet-based solutions.

The chapter is structured as follows. In the following section we present definitions of e-commerce and SMEs and argue for the importance of looking at e-commerce adoption barriers among SMEs. The section "What's In It?" briefly touches upon the reasons why SMEs might benefit from e-commerce, and therefore the necessity to look at the reasons why e-commerce is still not spreading. The section "Barriers to E-Commerce" discusses barriers of Internet-based e-commerce adoption found in previous literature, as well as relating and comparing them, where it is possible, with SMEs' adoption barriers of EDI and IS/ICT in general. Finally, the last section summarizes the findings of the chapter and gives some suggestions for further research.

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